By Mark DeCambre and Sunny Oh
U.S. stocks finished higher Thursday, partially recovering from the worst one day sell off since October on Wednesday, as investors focused on earnings reports from big technology companies and positive economic data.
Investors also monitored volatile trading in shares of small-cap companies such as Gamestop, which later saw a halt to trading from brokerages, drawing the attention of lawmakers in Washington.
What are major benchmarks doing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.50% gained 300.19 points, or 1%, to 30,603.36 and posted its largest one day point and percentage gain since Wednesday, January 6, 2021.
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.48% rose 36.61 points, or 1%, to 3,787.38.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.56% advanced 66.56 points, or 0.5%, to 13,337.16.
Benchmarks fell sharply on Wednesday, with the Dow dropping 633.87 points, or 2.1%, while the S&P 500 and Nasdaq Composite each dropped 2.6%. Volumes surged on Wednesday with more than 23 billion shares traded, the highest since May 2019, according to Dow Jones Market Data.
What’s driving the market?
All eleven S&P 500 index sectors rose Thursday, after all fell Wednesday, marking the first time that has occurred since Nov. 13 last year, as investors took heart from corporate earnings reports and data showing a slow economic recovery from the coronavirus pandemic.
“On balance, today’s numbers were in-line or better than expected with the job numbers particularly encouraging given the current state of the economy and lockdowns heading into next week’s monthly employment numbers,” Colin Cieszynski, chief market strategist at SIAWealth, told MarketWatch.
A reading of those seeking initial jobless claims in the week ended Jan. 23, fell by 67,000 to a seasonally adjusted 847,000 , marking the lowest level in three weeks, but layoffs were still high early in 2021 as the economy wrestled with a winter surge in the coronavirus.
Separately, a report on U.S. economic growth, or GDP, showed that the economy grew at a modest 4% annual pace in the final three months of 2020.
But others said Thursday’s trading may have had little to do with economic fundamentals.
Long-short hedge funds were also dipping their toes back into the market, after they cut down both their long and short positions this week to limit losses and avoid being caught out by the sharp surge in stocks like Gamestop /zigman2/quotes/203755179/composite GME -6.43% and AMC Entertainment /zigman2/quotes/200235402/composite AMC -3.38% , according to Mike Drummey, head of U.S. equity risk trading at Mizuho Americas, in an interview.
“So what inning is this? I think we’re in the later innings. Yesterday might have been max pain, but we’re nearing the end,” said Drummey.
The frenetic trading in small-cap stocks has been part of a battle between an army of individual investors organized on platforms like Reddit and short selling hedge funds. Brokerages such as Robinhood later froze trading in Gamestop, raising the hackles of lawmakers who called for investigations into the trading halt.